Branch Office Registration of a Foreign Company in Nepal

The establishment of a branch office by a foreign company within Nepal is regulated under the Companies Act, 2006 (2063 B.S.). The Office of the Company Registrar (OCR) serves as the designated authority responsible for registering such branch offices in Nepal.

As stipulated under Section 154 of the Companies Act, 2006, a foreign company is prohibited from conducting any business or carrying out any transaction in Nepal unless it has registered a branch office with the OCR.

For the purposes of this legal chapter, a foreign company shall be considered to have established an office or carried out a transaction in Nepal if it:

• Operates through an office set up in Nepal for a period of one month or longer,

• Appoints any person in Nepal for regular business contact, or

• Avails the services of any person or entity in Nepal for such purposes.

That said, the following activities, when undertaken with the approval of the competent authority, shall not be treated as carrying on a business or transaction under this chapter.

• Making investments in shares of a company duly established under Nepalese law,

• Lending money to such a company, or

• Participating in the operation or management of such a company.

1. What is the procedure to register a branch office?

• Step 1: Submission of an application for branch office registration along with the required documents to the OCR.

• Step 2: Obtain an approval or recommendation letter from the concerned government authority for the registration of the branch office in Nepal.

(If the foreign company is selected by any competent body pursuant to prevailing law or enters into a contract with any competent body for any business in Nepal, such selection or contract shall be deemed to be the permission given by the concerned body.)

• Step 3: Approval and issuance of the branch office registration certificate by the OCR after evaluation of the submitted documents.

• Step 4: Tax registration (PAN/VAT) at the relevant Inland Revenue Office.

• Step 5: Business registration at the local level (rural municipality, municipality, or ward office).

2. What are the required documents for registration of a branch office in Nepal?

The required documents for the registration of a branch office in Nepal are:

• Application for Registration of Branch Office (in the prescribed format of the OCR).

• Foreign company’s certificate of incorporation, Memorandum of Association (MOA), Articles of Association (AOA), and their Nepali translation with notarization.

• Signed copy of the company profile of the foreign company.

• Declaration by a director or authorized representative of the foreign company regarding the truthfulness of submitted information and documents.

• Board resolution of the foreign company authorizing the registration of a branch office in Nepal.

• Copy of the passport of all directors of the foreign company.

• Copy of the citizenship certificate (or passport for foreign nationals) of the Nepal branch office’s authorized representative.

• Proposed plan of the branch office (including business activities and estimated investment).

• Letter of appointment of the authorized representative in Nepal.

• Power of attorney (if any).

• Executed agreement by the foreign company with a government authority of Nepal (if available).

• Approval or recommendation letter from the concerned government authority of Nepal (if available).

3. What is the cost (government fee) required for registration of a branch office?

The government fee for the registration of a branch office in Nepal is based on the proposed investment amount to be made in Nepal. The applicable government fee is as follows:

If the proposed investment amount is not fixed 100,000

4. What is the timeline for registration of a branch office?

Generally, it will take 2 to 3 weeks for the completion of the registration process of a branch office in Nepal, assuming all documents are in order and approvals are obtained promptly.

5. What are the business activities permissible for a branch office?

A branch office can operate business activities that are permissible under Nepalese law. However, the business or transaction to be carried out by the branch office must be similar to that of the business and transaction the foreign company carries out in its country of incorporation. Activities restricted under the Foreign Investment and Technology Transfer Act (FITTA) for foreign entities may not be permissible.

6. What sorts of approval are required for branch office registration in Nepal?

Section 154(2) of the Companies Act, 2006 requires approval from the competent government authority to set up a branch office in Nepal. As a matter of practice, branch offices are registered based on a license, selection, or agreement with the competent authority in Nepal (e.g., a ministry or department overseeing the relevant sector). If a foreign company is selected by, or enters into an agreement with, a competent authority, such selection or agreement is also considered to be the approval for the purposes of branch office registration.

7. Is there a minimum amount of investment for branch office registration?

The Companies Act, 2006 does not specify a minimum amount of investment that a foreign company is required to make for the registration and operation of its branch office. The amount shall be invested based on the needs of the company for the operation of its business in Nepal. However, the proposed investment amount determines the registration fee.

8. What is the difference between a Branch Office and a Liaison Office in Nepal?

• Branch Office: Can be engaged in income-earning activities in Nepal. It can conduct commercial transactions, provide services, and generate revenue.

• Liaison Office: Shall not be entitled to do any income-earning activity in Nepal. It can only act as a point of contact, facilitate communication, conduct market research, and promote the parent company’s interests without generating local revenue.

9. What is the legal status of a branch office in Nepal?

9.1 Investment made to run the branch office is not considered foreign investment under the Foreign Investment and Technology Transfer Act (FITTA). Therefore, it does not require foreign investment approval from the Department of Industry (DOI). FDI approval is only required if the foreign investor wants to conduct business by establishing a local subsidiary company in Nepal.

9.2 Registering a branch office does not create a separate legal entity. It is merely the registration of a branch office of the foreign company within the territory of Nepal. The foreign parent company remains fully liable for all acts and obligations of the branch office.

10. What are the other compliance requirements for a branch office?

• Registration at the concerned Inland Revenue Office (IRO) for tax purposes (PAN/VAT). The branch must pay income tax and other applicable taxes based on its income and business activities in Nepal.

• Submission of Initial Compliance (details of authorized representative, registered office address, etc.) to the OCR within 3 months of registration.

• Appointment of an auditor, preparation of annual financial statements, and submission to the OCR within six months of the end of each fiscal year.

• Submission of the financial statement of the branch office’s head office (parent company) to the OCR within 3 months of its preparation.

• Submission of annual financial statements to the Inland Revenue Department for tax assessment.

• Payment of annual business tax and monthly rent tax (if applicable) at the local level (ward office or municipality).

11. What is the difference between a Branch Office of a Foreign Company and a Local Subsidiary Company established through Foreign Direct Investment (FDI) in Nepal?